Subsequent events procedures up to the report date
The ISA 560 procedures an auditor performs between year end and the report date to find subsequent events, and how to keep them current up to signing.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Fieldwork is finished and the file is ready, but the partner signs only weeks later, once the client finally returns the representation letter. In between, the client's biggest customer goes into business rescue, and nobody on the team hears of it, because the subsequent events work was done, ticked and filed on the last day of fieldwork.
ISA 560 is clear about the period it covers: the auditor's procedures to identify subsequent events run from the date of the financial statements to the date of the auditor's report, or as near to it as practicable. The gap between finishing fieldwork and signing is where subsequent events work most often falls short.
Why the period runs to the report date
The auditor's report is dated no earlier than the date on which the auditor has obtained sufficient appropriate evidence for the opinion, including evidence that the statements have been prepared and that those with authority have taken responsibility for them. From that date, the report speaks for the whole period up to it. If something happened in that window that requires adjustment or disclosure under IAS 10 (or Section 32 of IFRS for SMEs), the auditor is expected to have found it.
Two kinds of event matter:
- Adjusting events, which give evidence of conditions that existed at year end, such as a customer's insolvency revealing that a year-end receivable was not recoverable, or the settlement of a court case that was pending at year end.
- Non-adjusting events, which reflect conditions that arose afterwards, such as a fire, a major acquisition or a large share issue, and which may need disclosure.
Inquiries, minutes and records after year end
ISA 560 requires procedures designed to identify events requiring adjustment or disclosure. At a minimum, they include:
- Obtaining an understanding of management's procedures for identifying subsequent events.
- Inquiring of management and, where appropriate, those charged with governance whether any subsequent events have occurred.
- Reading minutes of meetings of owners, management and those charged with governance held after year end, and asking about matters discussed at meetings whose minutes are not yet available.
- Reading the entity's latest interim financial information, such as monthly management accounts.
Good inquiries are specific. Ask about new borrowings or commitments, sales or acquisitions of assets, share issues, assets destroyed or seized, developments in litigation or claims, unusual accounting adjustments, and anything that calls into question the accounting policies, including going concern. Then look at the records yourself: bank statements after year end, sales and credit notes in the first weeks, payments to lawyers, receipts from long-overdue customers.
Raise the requests for minutes, management accounts and post-year-end bank statements through the RFI console, where staff create, send and track requests for documents, answers and confirmations whichever screen they were raised from. The request's timeline then shows what was asked and when it arrived, which matters if the answers come in close to signing.
Updating the work close to signing
When there is a gap between fieldwork and the report date, the work needs updating, sometimes called a bring-down. Before the partner signs:
- repeat the inquiry of management, covering the period since fieldwork ended;
- read any minutes and management accounts produced since then;
- update the legal position where litigation was open;
- obtain the written representations dated as near as practicable to, but not after, the report date, including the representation that all events requiring adjustment or disclosure have been dealt with.
On the work item, the update should be a step in its own right. Each work item lists the procedures and documents required, and a step is marked done only with a written response and its documents, or set aside with a reason; steps are never deleted. Write the date the update was performed into the response, so a reviewer can see how close to signing it was.
Adjusting the statements before the report is approved
If an adjusting event is found, the statements are corrected before the report is approved. In the Studio, staff can post a year-end adjusting entry, and a wrong adjusting entry is reversed with a record of who and why, never deleted. On the audit side, staff can record an audit adjustment on a lead schedule line with a reason, so the adjustment and its cause sit with the evidence.
For a non-adjusting event, the question is disclosure: the nature of the event and an estimate of its financial effect, or a statement that such an estimate cannot be made. Read the note against the facts; a vague sentence about "events after the reporting date" does not meet the requirement. How the statements present these events is covered in events after the reporting period.
The report date and the fingerprint bound at issue
In Achekam, the engagement team drafts the auditor's report on standard ISA wording, approval is refused while any bracketed placeholder remains, and only the engagement partner approves. The partner can send the client a read-and-comment preview link, send the approved report for e-signature, and record it as issued. Recording the issue binds the statements' fingerprint and starts the file-assembly clock. On the statements' side, issuing stores the final PDF with a fingerprint and locks that version.
That binding is useful for subsequent events in a practical way. If the statements change after the preview because an adjusting event was found, the version the report is bound to at issue is the corrected one, and the earlier draft cannot be mistaken for it. Make sure the subsequent events update covers the period up to the date the report actually carries, not the date the preview went out.
Facts that come to light after the report is dated, or after the statements are issued, follow a different path under ISA 560; see when an error surfaces after statements are issued.
A completion check on subsequent events
- Was the update performed as close as practicable to the report date?
- Were minutes read for every meeting since year end, and inquiries made about those without minutes?
- Were post-year-end bank statements, sales and credit notes reviewed?
- Is every adjusting event corrected, and every material non-adjusting event disclosed?
- Is the representation letter dated as near as practicable to, but not after, the report date?
The ACCA's article on subsequent events uses a case study to show how events after the reporting period affect the statements under IAS 10 and what auditors must do under ISA 560.
For your next signing meeting
Put one standing question on the agenda: "What has happened since our fieldwork ended?" Ask it of the directors in the meeting, record the answer, and date it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
